Perma-Fix Environmental Services Q2 2025 Earnings Call Transcript

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August 7, 2025

Key Takeaways

  • Positive Sentiment: Q2 revenue from continuing operations rose 4.3% year-over-year to $14.6 million, and gross profit improved to $1.5 million from a negative $1.3 million a year ago.
  • Positive Sentiment: The Treatment Segment delivered ~37% revenue growth and more than doubled waste receipts to $14 million, with early technical challenges in Q2 overcome through automation and process improvements.
  • Negative Sentiment: DFLAW startup was delayed from August 1 to as late as October 15, postponing an estimated $3 million per month in recurring revenue, though long-term cash flows remain substantial.
  • Positive Sentiment: The company secured a spot on the Navy’s $240 million RadMAC III IDIQ and entered a six-month planning phase for the West Valley cleanup, positioning Perma Fix for multi-year services contracts.
  • Positive Sentiment: PFAS initiatives advanced with $500 000 in YTD sales (~30 000 gallons), FL operations resumed, a Gen 2 system in Oak Ridge underway (3 000 GPD capacity), and over $7 million in international waste receipts.
AI Generated. May Contain Errors.
Earnings Conference Call
Perma-Fix Environmental Services Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, and welcome to the Perma Fix Fiscal Second Quarter twenty twenty five Earnings Conference Call. Please note this conference is being recorded. I will now turn the conference over to your host David Waldman of Crescendo Communications. David, the floor is yours.

Speaker 1

Thank you, Jenny, and good morning, everyone. Welcome to Permafix Environmental Services Second Quarter twenty twenty five Conference Call. On the call with us this morning are Mark Duff, President and CEO Doctor. Lou Senefani, Executive Vice President of Strategic Initiatives and Ben Naccaratto, Chief Financial Officer. The company issued a press release this morning containing second quarter twenty twenty five financial results, which is also posted on the company's website.

Speaker 1

If you have any questions after the call or would like any additional information about the company, please contact Crexendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within the conference call may be deemed forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non GAAP financial measures. All statements on this conference call other than a statement of historical fact are forward looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U. S.

Speaker 1

Securities and Exchange Commission as well as this morning's press release. The company makes no commitment to disclose any revisions to forward looking statements or any facts, events or circumstances after the date hereof that bear upon forward looking statements. In addition, today's discussion will include references to non GAAP measures. Perman Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is available in today's news release and on our website.

Speaker 1

I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

Speaker 2

All right. Thank you, David, and good morning, everyone. We delivered a sequential and year over year revenue growth in the second quarter, accompanied by a meaningful improvement in our gross margin. These results reflect continued progress on our operational initiatives, particularly within our Treatment Segment, where revenue increased approximately 37% compared to the same period last year. Even more notable was the fact that our waste receipts more than doubled year over year to approximately $14,000,000 in 2025.

Speaker 2

That said, treatment results were tempered by technical challenges that limited production capacity early in the quarter. These issues have been resolved through automation and process improvements that are already enhancing our throughput, improving safety, and reducing manual labor. We expect to realize the full benefit of these enhancements in the second half of the year. Importantly, we continue to realize stay shipments from Hanford in support of the cleanup program as well as the tank management mission, which are estimated to be about $3,000,000 of revenue per month. A related note, the Department of Energy recently announced a delay in the DF Law facility startup from August 1 to as late as October 15.

Speaker 2

Despite the short term delay, that program represents substantial new revenue streams for us. We remain encouraged by the long term outlook for DF Law and the substantial reoccurring revenue and cash flow that is expected to contribute once operational. In our Services segment, project delays occurred earlier in the quarter, largely due to the federal government and federal procurement timing impacting our results. However, field execution and cleanup and remediation work is now tracking on schedule across key DOE and DOD sites. We are also pleased to report that our team was awarded a position on the Navy's $240,000,000 RadMAC III IDIQ contract during the quarter.

Speaker 2

This award enforces our core competencies in radiological cleanup and positions us for a steady stream of potential task score opportunities in the coming quarters. We have also entered the six month planning period for the West Valley project as part of the BWXT led team where we expect to play a key role in long term DOE cleanup efforts. While revenue recognition will be tied to DOE's approval of our final performance strategy, expected later this year, we view this as a significant multi year opportunity for our services business. Turning now to PFAS, we made strong progress this quarter on multiple fronts. We expanded demonstration activities with both Fortune 500 companies and large government agencies.

Speaker 2

Year to date PFAS related sales have reached approximately $500,000 representing about 30,000 gallons of material so far. Daily operations have resumed at our PFAS unit in Florida, and construction is underway on our Gen two system in Oak Ridge, Tennessee, which is designed to support up to 3,000 gallons of production per day while reducing unit operating costs. Gen2 system will also provide the potential to support mobile field deployment options for use in landfills, waste treatment plants and remote sites. We continue to be encouraged by the technology's destruction performance and scalability and the ability to reduce liability for our customers at a competitive price. Internationally, we received over $7,000,000 in waste receipts during the past two quarters and continue to see strong interest from customers in Canada, Germany, Mexico and Italy.

Speaker 2

Our EUR50 million contract with the European Union in Italy is progressing through the permitting and preparation phase and we remain on track to initiate treatment operations in 2026. Across the organization, remain focused on disciplined cost management and targeted margin improvement initiatives, which have continued to be implemented throughout Q3 as well. These programs are already contributing to improved productivity and are expected to support stronger EBITDA performance in the second half. In addition to our revenue generating activities, we are pursuing several large scale federal and commercial procurement opportunities, including bids with the U. S.

Speaker 2

Army Corps of Engineers and DOE National Laboratories. Combined, these opportunities represent more than $200,000,000 in potential contract value, with award decisions expected during the 2026. Company wide, our waste backlog currently stands at approximately $13,200,000 providing strong visibility into the second half treatment volumes and services activities. We are also encouraged by evolving PFAS policy and regulatory developments in both the federal and state levels, which continue to support demand for comprehensive destructive technologies like ours. With growing treatment volumes, renewed activity in our services segment, and commercial traction in PFAS, along with a healthy pipeline of domestic and international opportunities, we believe Perma Fix is well positioned to deliver improved financial results in the 2025 and build long term momentum heading into 2026.

Speaker 2

With that, I'll now turn the over to Ben Naccarato to walk through our financial results in more detail. Ben?

Speaker 3

Thank you, Mark. I'll start with revenue. Our total revenue from our continuing operations for the second quarter was $14,600,000 compared to last year's second quarter of $14,000,000 That's an increase of $600,000 or 4.3%. Our revenue in the Treatment Segment increased by $3,100,000 over the prior year or 36.6% as the waste volumes increased as did our average price of waste, which is usually impacted by waste mix. Our Treatment Segment began the quarter with backlog of $10,000,000 and had waste receipts and related revenues in excess of $14,000,000 during the quarter, which contributed to the improved revenue and the strong backlog entering the third quarter.

Speaker 3

The increase in revenue was offset by a decrease in revenue at our Services segment of 2,500,000.0 Project delays and completion of large projects in the prior year were the main drivers of this shortfall. Moving to gross profit. For the quarter, our gross profit was $1,500,000 compared to a negative $1,300,000 in 2024. That's an improvement of $2,800,000 The revenue increase and lower variable costs of the waste treated had a positive impact on gross profit of totaling about $3,400,000 which was partially offset by increased fixed costs at the plants of $683,000 The increased fixed costs were primarily labor related due to increases in waste receipts. In the Service segment, gross profit was relatively flat with prior year, increasing by $90,000 as the impact of lower variable costs and fixed expenses was offset by the impact on gross profit of lower revenue.

Speaker 3

The lower variable costs were the result of improved profitability of the projects performed this year, while our lower fixed costs were the result of reductions to our indirect labor. Turning to SG and A. Our SG and A costs for the quarter were $4,100,000 compared to prior year total of 3,500,000.0 The increase is evenly split between marketing and admin. Our marketing expense were higher from higher business development expenses related to PFAS and project bidding. In addition, certain personnel formerly focused on operations are being deployed in a business development role supporting PFAS, DFLAW and our international opportunities.

Speaker 3

On the admin side, the addition of our COO and the related travel and benefits with that position had the greatest impact on our increased costs. Net loss for the quarter was $2,700,000 as compared to prior year's net loss of $4,000,000 Our total basic and diluted earnings per share or loss per share for the quarter was $0.15 compared to a loss per share of $0.27 in the prior year. EBITDA from continuing ops for the quarter was as defined in this morning's press release was a negative $2,300,000 compared to negative EBITDA of $4,600,000 last year. Turning to some balance sheet items. Our cash on the balance sheet at quarter end was 22,600,000.0 Our waste backlog at the June was $13,200,000 which is up from $7,900,000 at the end of last year and higher than June 30 a year ago, where it was 8,700,000.0 at the time.

Speaker 3

Our total debt for the quarter at quarter end is $2,000,000 excluding debt issuance costs, most of which is owed to our primary lender, PNC Bank. Finally, I'll summarize our cash flow for 25,000,000 Our cash used by continuing operations is $3,800,000 Cash used by discontinued operations is $222,000 Cash used for investing in continuing operations was $1,500,000 most of which relates to capital spending and the remainder on permits and other investments. Our cash used for investing for DISCOPS is $16,000 Cash used for in financing was $626,000 of which approximately $313,000 relates to monthly payments on the term and capital loans, finance leases of 148,000 and payments of $194,000 related to our public offering completed in December 2024, and this is offset by a small increase in option expenses of $49,000 With that, I will now turn the call over to the operator for questions.

Operator

Thank you very much. We will now be conducting our question and answer Our first question is coming from Aaron Spicela of Craig Hallum. Aaron, your line is live.

Speaker 4

Yes. Good morning, Mark and Ben. Thanks for taking the questions. First, on the treatment side of things, you kind of talked about some challenges, improvements that have been made. Can you just give a little bit more detail on there and maybe how you think about the margin pickup in the back half and just maybe how you're thinking about overall kind of treatments in the back half of the year?

Speaker 2

Yes, Aaron, appreciate that question. We started receiving, I think I mentioned this the last quarter call, that we started receiving a sizable waste stream from the Hanford operation side of the house, not the tank closure, but the it actually comes through tank closure but it's more associated with operations of the tank farms themselves. This waste stream includes some solidification processes that had to occur and we were having a hard difficult time with the process because it was labor intensive, it was going very slow and we implemented some equipment and did the training and got the permits aligned with it as well as the alignment with the folks who will take the waste from us the Hanford site to make sure that everything was worked properly and the performance of the treatment was adequate. That took several months, we didn't expect it to take. If you remember last quarter we talked about the fact that we had to hire a lot of people and it took a while to get trains in place.

Speaker 2

That all happened and then had problems with production. That has all been resolved about halfway through the quarter and we really started getting our feet under us in June and meeting our performance goals. So now that waste stream should be sustainable through '27 at minimum and it's really a core competency for the type of work we do at our Northwest plant. All the other waste streams are going well and the Northwest facility is becoming a real anchor for us as expected in support of upcoming projects at Hanford as well, but also many other clients around the country and internationally as we continue to expand the operations there.

Speaker 4

Alright. Thanks for the color there. And then, you know, on Hanford, I saw the the wording in the release on as late as October 15. You know, maybe just talk about it sounds like, you know, confidence that that could start up before then, and you alluded to it, but just preparations being made at the Northwest facility to handle those volumes as they start up.

Speaker 2

Yeah, the delay was somewhat unexpected to us because was so close to the anticipated start date, but it's not really unexpected that they would have a delay in these types of things. We heard that there was a number of items they're working through that have been publicized by the independent groups that make sure they're ready and that they were finding nitrogen oxide in some of the off gas systems that they had that they had to deal with and address those concerns. We've been told informally that that's what they're working on right now. It shouldn't be the entire period. They give themselves some buffer.

Speaker 2

That's largely speculation. They're not really discussing what their timeline really is, but I know DOE is not going want to do multiple delays so we're pretty confident that they should be done well within that period and then get rolling. Once they get rolling then they'll enter the hot commissioning period, that's where they introduce tank waste to the plant and they'll do about a dozen to two dozen canisters. Then they'll test those canisters for performance, making sure it meets the standards they designed the facility to do and test all the systems, make sure they are working properly and then they will enter into an operational phase after that. The operational phase would most likely be sometime in Q4, I'm not sure when or how long it will take between the two phases, but it seems like they're on track to be in operational phase before the end of the calendar year and get rolling.

Speaker 2

Does that address your question, Aaron? Not sure if I hit all the points.

Speaker 4

Yeah, no it does. Maybe just preparations at Hanford to be able to handle everything. You feel comfortable there, investments that you've made and things like that.

Speaker 2

Yeah, we've completed our preliminary design of the systems we need to have in place for receipt of that waste, so we're ready to go. We will continue to make investments, capital investments as the DF law gets rolling into larger quantities. In other words, we will duplicate the systems we've got and add staff accordingly. We're ready to go now to do at least the operational period and it's still difficult for DOE to really nail down the different types of waste we're going be getting. They provided estimates along the way on the total quantities that they're expecting but there's about a dozen different waste streams and we're not sure how much of each one that we'll be receiving.

Speaker 2

We really got to see how things go during commissioning and early startup to really know how we need to expand so we don't over expand to support the full operation.

Speaker 4

Okay, that makes sense. And then on the services side of things, you talked a little bit about West Valley in the planning period, a little bit on RadMAC. Just how are you seeing that services segment here in the next couple of quarters? West Valley kind of more of an early twenty twenty six start up in your eyes or maybe just some color there would be helpful.

Speaker 2

Yeah, services had a negative impact on our performance this quarter particularly. As I mentioned in the notes, there were some delays getting into the field and some delays in procurement. Both of those are largely attributable to the change in administration and a lot of retirements and uncertainty in the federal government procurement shops. They're working through those things. I understand it's very common within the DoD as well as DOE with the changes that have been made.

Speaker 2

The Trump administration is pushing very hard on both those agencies to streamline procurement and make them more efficient. We're starting to see some of that already, but overall, to answer your question specifically, we see that picking up on both the services side in this quarter and next quarter, particularly in regards to several projects that are just now getting rolling and some procurements that we just submitted bids on at the end of Q2 and beginning of Q3. West Valley is moving a little slower, a lot slower than we thought it would. We thought we'd be working by now, but the way it goes with these types of contracts, again it's an end state contract, what that means is you put together a strategy, a very detailed strategy for the next ten years of what you're going get done and then you line up your cost with that to stay within a funding level and then the Department of Energy approves that. And we're in that strategy stage, pulling the strategy together for the next ten years, we're intimately involved in the waste management portion of that and then DUS approved that within the funding they've got.

Speaker 2

So that's where that process is now, so that finishes up here around the first of the year and then we're anticipating to be implementing that strategy beginning in Q1. It just depends on if there's changes to our approach or funding that has moved one way or another could impact that. That's why we are hesitant to really make a real forecast on the revenue we are going to get from West Valley at this point, but we still remain very optimistic. Our scope is very important and one of the primary goals for the site in the next several years so we're optimistic that we're playing a critical role in there but it just hasn't been nailed down yet

Speaker 4

overall. All right, Thanks for the color and taking the questions. I will turn it over.

Speaker 2

Okay. Thanks, Karen.

Operator

Thank you very much. Our next question is coming from Howard Rouse of Wellington Shields. Howard, your line is live.

Speaker 5

Thank you. Basically one question. You anticipate production of DFL to ramp up and what are our associated revenue expectations from now through 2026?

Speaker 2

Good morning, Howard. Haven't really given a detail the ramp up, but what we've been told informally in meetings and as part of the overall program is, again, they'll do the commissioning now. Once operations start, as I mentioned, it will be in Q4, operations has been informally defined as about 40% production capacity. Remember, the design capacity is a million gallons a year and at a million gallons a year they anticipate generating 8,000 cubic meters of waste and looking at the waste streams that they're talking about here, we're estimating that to be in the 70,000,000 to $80,000,000 range for the 8,000 meters. So if you do the math and they're running at 40% capacity later in Q4, we could anticipate once they get to that point, 2,000,000 or $3,000,000 of revenue a month.

Speaker 2

They'll be ramping up as fast as they can, as safely as they can over the next eighteen months after operations begin to try to get to 70 or 80% operational capacity on their way up to full capacity. We're anticipating again, not knowing all the volumes of the different types of waste we'll receive, again just to summarize, dollars 2,000,003 million dollars in revenue upon operational phase start up and then ramp up from there over the next eighteen months to twenty six.

Speaker 5

That's all I had. Thank you very much. Best of Thank Bye.

Operator

Thank you very much. Our next question is coming from Aaron Warwick of Breakout Investors. Aaron, your line is live.

Speaker 6

Good morning, gentlemen. Just a question on the Navy contract or IDIQ, I should say. Could you give us an idea about the size of it and how many different entities there are that are available to bid on those and just kind of what your expectations are there?

Speaker 2

Sure, Aaron. I'm glad you asked that. IDIQs are very difficult to nail down. We have a lot of IDIQs, don't see a whole lot of action. We just submitted a very sizable job with DOE through one of their IDIQs that we haven't seen in action in quite a while.

Speaker 2

This Navy IDIQ for the RadMAC III is a very active contract and if you do the research, if you just type in Googling it, it runs out of funding, it's that much used, in other words they pump a lot of funding through this historically. So it's $240,000,000 and they have six total awards, three large business and three small business and again we're a small business and small business gets a bid on all the large business task orders but not vice versa. Can't bid on the small ones. Biggest can't bid on the small ones. To answer your question, we already got our first task order, we're working on it right now, it's due here in a couple of weeks They don't give a forecast or anything like that, we don't know how it lines up with funding, but it's basically to do radiological remediation mostly in the California Coast, initially in Southern California and San Diego area and then also we're anticipating a number of projects in the Bay Area as well where there's been long term radiological issues.

Speaker 2

To answer your question, is competitive, each task score is competitive. We are very comfortable that the three small businesses will be competing with some of the smaller tasks we know very well and the type of work that is done within this contract is exactly what our strongest core competencies are aligned with. We have some technologies in these areas, but again they are competitive. It's really difficult to define how much revenue we can anticipate on an annual basis.

Speaker 6

Thank you guys.

Speaker 2

Thanks Erin.

Operator

Thank you very much. Well we appear to have reached the end of our question and answer session. I will now turn it back over to the management for their closing comments.

Speaker 2

All right. Thank you, Jenny. As we move into the 2025, remain focused on executing against our key strategic priorities, expanding our treatment and PFAS backlogs, driving performance improvements across all of our operations, and converting large services and federal bid opportunities. The operational investments we made earlier in the year, combined with the progress we are seeing at Perma Fix Northwest within the PFAS program and across DOE segments and engagements position us to deliver strong results in the coming quarters. While timing around certain federal procurement processes remains variable, our backlog, our field execution, and our pipeline visibility continue to improve.

Speaker 2

In summary, we remain confident in our ability to deliver a stronger financial performance in the back half of the year, supported by the progress we have already achieved. We appreciate your continued support and look forward to updating you again next quarter on our progress. Thank you.

Operator

Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

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